For the last couple of years, two things about the Twitter narrative have been constant: It has a user growth problem, but it doesn’t have an advertiser problem.
Now Twitter has an advertiser problem, too.
If you step back, though, you can see that Twitter’s ad problem wasn’t a one-quarter problem. It has been brewing for a while — as its user growth has stalled, its ad sales growth has stalled, too. The company generated $2.2 billion in revenue last year, but its sales growth has been decelerating for a while.
MoffettNathanson analyst Michael Nathanson spells it out quite clearly in this chart:
And to be very clear: Twitter now has an ad problem because of its user problem. It doesn’t have enough scale to compete with Facebook and Google.
For a while, this didn’t matter, because Twitter and its ad boss, Adam Bain, had done a very good job of courting big brand advertisers and the ad agencies that spend their money. They got them to take a flier on Twitter.
But Twitter isn’t novel anymore, and brands and agencies who want to play with a new shiny object can go to Snapchat.
Again, you can see that in Nathanson’s chart above. Note the blue line, which represents sales on Twitter’s own properties — see how it’s dropping faster than the rest of Twitter’s revenue, which includes its third-party ad network? That’s brand advertisers pulling away from Twitter faster than direct response advertisers — the kind that buy app-install ads and other “click now” ads.
Twitter’s answer to all of this is the same answer that everyone else on the web has: We’ll fix it with video.
The company says it wants to convince its advertisers to upgrade their old text+photo Twitter ads with video ads, which sell at higher prices. This sounds like a good idea, but then again, it’s the same idea everyone else has — and Twitter’s already having trouble competing with everyone else.
Nathanson was kind enough to let us use his chart, so we’ll give him the last word, too, from his report today: “It’s becoming abundantly clear that Twitter now not only suffers from user fatigue, but advertiser fatigue as well.”
This article originally appeared on Recode.net.